By TIOL News Service

NEW DELHI, DEC 10, 2015: THE appellant company is conducting the business of providing pre-printed meal vouchers which are given the nomenclature of 'Sodexo Meal Vouchers'. As per the appellant, it enters into contracts with its customers for issuing the said vouchers. These customers are establishments/companies having number of employees on their rolls. They provide food/ meals and other items to their employees up to a certain amount. It is for this purpose that the agreement is entered into by such establishments/companies with the appellant for issuing the said vouchers. After receiving these vouchers for a particular denomination, some are distributed by the companies to its employees. For utilisation of these vouchers by such employees, the appellant has made arrangements with various restaurants, departmental stores, shops, etc. (hereinafter referred to as 'affiliates'). From these affiliates, the employees who are issued the vouchers can procure the food and other items on presentation of the said vouchers. The affiliates, after receiving the said vouchers, present the same to the appellant and get reimbursement of the face value of those vouchers after deduction of service charge payable by the affiliates to the appellant as per their mutual arrangement. In this manner, the appellant, by issuing these vouchers to its customers, gets its service charge from the said companies. Likewise, the appellant also takes specified service charges from its affiliates.

The question that has arisen for consideration is as to whether these vouchers can be treated as ' goods ' for the purpose of levy of Octroi or Local Body Tax (LBT) or the aforesaid activity only amounts to rendering service by the appellant. The issue has to be examined as per the relevant provisions of the Maharashtra Municipal Corporation Act [Act No. LIX of 1949] under which the Municipal Corporation is entitled to levy and collect Octroi or LBT.

The High Court had held that these vouchers are goods.

The Supreme Court analysed the issues:

(I) Exact Nature of Meal Vouchers: It is to be borne in mind that the vouchers are not 'sold' by the appellant to its customers, as wrongly perceived by the High Court, and this fundamental mistake in understanding the whole scheme of arrangement has led to wrong conclusion by the High Court. The High Court has also wrongly observed that vouchers are capable of being sold by the appellant after they are brought into the limits of the city. These vouchers are printed for a particular customer, which are used by the said customer for distribution to its employees and these vouchers are not transferrable at all.

(II) Transaction Regulated By RBI Guidelines: without the sanction/ authorisation of the RBI to operate such a payment system under the Payment and Settlement Systems Act, 2007, nobody can operate such a system, as the purpose of the said Act is to regulate the payment and settlement thereof by means of ' Paper Based Vouchers '. An insight into the Policy Guidelines dated March 28, 2014 issued by the RBI to regulate such transactions would also clinchingly bears out that the real nature of the transaction is to provide service and by no stretch of imagination these vouchers can be termed as 'goods'.

(III) Real Character Of The Transaction Is The Facility By The Customers As Employers To Their Employees: the value of such free food and non-alcoholic beverage provided by an employer to an employee is treated as expenditure incurred by the employer and amenity in the hands of the employee. It is this perquisite given by the customer to its employees by adopting the methodology of vouchers and for its proper implementation, services of the appellant are utilised.

Held: Sodexo Meal Vouchers are not 'goods' within the meaning of Section 2(25) of the Act and, therefore, not liable for either Octroi or LBT.

(See 2015-TIOL-293-SC-MISC)